The EUR/USD is on track for the second weekly gain as forex traders reflect on the recent US consumer inflation and retail sales numbers. It is trading at 1.1955, which is slightly below the weekly high of 1.1993.
Stimulus-fueled US growth
This week has been relatively strong for the United States. The government continued its vaccination drive even after the Johnson & Johnson missaps.
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Data published by the country revealed that the $1.9 trillion stimulus package had an immediate impact on the economy. It, together with higher gasoline prices, pushed consumer prices to 2.6% in March, the highest level in years. Core CPI also rose slightly to 1.6%.
On Thursday, the country also published strong retail sales numbers. The data revealed that the US retail sales surged by 9.8% in March and by 28.6% year-on-year. These were better numbers than the expected 5.9% and 15%. Core retail sales surged by 8.4% in March after falling by 2.5% in the previous month.
Further data revealed that initial jobless claims declined by 576k last week. This was the lowest figure since the pandemic started. Meanwhile, the manufacturing sector in New York and Philadelphia also surged.
Therefore, the EUR/USD pair rose primarily because the market is not convinced that this growth will last. Furthermore, in the next few months, the impacts of the stimulus will start fading. This case is made stronger by the performance of the bond market, where the yield on the 10-year dropped to 1.535%. This was lower than the year-to-date high of 1.76%. Similarly, the 30-year yield declined to 2.270%.
Later today, the EUR/USD will react to the latest EU CPI numbers. Based on the preliminary numbers published earlier this month, analysts expect the data to show that the overall CPI jumped from 0.9% in February to 1.3% in March.
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EUR/USD technical analysis
A look at the four-hour chart shows an important thing. The pair rose to 1.1990, where it had found substantial resistance on March 11 and 18. The pair has been forming what looks like the cup and handle pattern. Therefore, this pullback is partly because of the handle section. Also, this is happening at the 50% Fibonacci retracement level. Therefore, the pair may resume the upward trend as bulls target the 61.8% retracement level at 1.2035.
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